The insurance industry is demonstrating its ability to withstand potential adverse market or economic developments, according to panelists at the 39th Annual S&P Global Ratings Insurance Conference.

Amidst concerns such as higher inflation and fluctuating interest rates, industry leaders shared insights on how different segments within the insurance sector can navigate these challenges and capitalise on opportunities.

Countercyclical brokers and life insurers, in particular, stand to benefit from higher rates in the long run, albeit with potential short-term hurdles.

Greg Williams, Co-Founder, Chairman, and CEO of Acrisure Holdings Inc., emphasised that macroeconomic risks like higher inflation act as tailwinds for the broker industry.

Charles Lowrey, Chairman and CEO of Prudential Financial Inc., noted that while higher interest rates may cause initial difficulties for life insurers, those that survive can ultimately reap long-term gains.

experiences and is unlikely to see a resurgence of cash flow underwriting.

The reinsurance market was a focal point of discussion, with panelists acknowledging the sustained increases in reinsurance rates, especially in short-tail lines such as property and property catastrophe.

This shift is attributed not only to loss trends but also to investors’ expectations of better returns on their capital.

While the reinsurance market faces challenges, demand from primary insurers remains resilient, though they may experience increased volatility as reinsurers adjust rates and capacity.

Reinsurers have made fundamental changes to their catastrophe (cat) offerings, resulting in an optimistic outlook for this segment.

However, the casualty side is experiencing margin erosion, prompting companies like RenaissanceRe Holdings Ltd. to shift their focus towards specialty lines.

Despite holding a negative sector view on global reinsurance, analysts suggest that the pricing and underwriting adjustments being made have the potential to positively impact reinsurers’ profitability in the current year.

If reinsurers can maintain discipline and exhibit the ability to consistently generate returns that cover their capital costs, there is a possibility of revising the sector view to stable.
Author: Akankshita Mukhopadhyay